Is the professional sports data-aggregation business a sure bet?

Nobody is as opiniated as a fan of a particular sport team. This probably explains why there exist so many metrics for any given professional sport: to justify why your team is the better team. Despite multiple millions of data points now gathered per baseball game, no one seems to be replicating the success of the Moneyball story, but that doesn’t stop fans from spending hours upon hours analyzing data in an attempt to make a quick dollar from sports betting.

Sports betting was legalized in the United States in 2018 after the Supreme Court decision to strike down the Professional and Amateur Sports Protection Act (PASPA). Since then, 39 states have legalized sports betting, and that number is expected to reach 45 in the next two to three years. The US market therefore represents a large opportunity compared to the more mature international markets:

• In 2024, Americans legally wagered $150 billion on sports, up from $121 billion the year before.
• 95% of all sports bets placed in 2024 were placed via mobile phone apps.
• 80% of bettors are between the ages of 21 and 54, and over half of the bettors hold a bachelor’s degree or higher.
• Canada sports betting penetration rate is close to 50% versus the United States at 11%.

Modern sports betting is much more data-driven and real-time than it was just 10 years ago when the majority of bets were simply on which team would win. Now, more than half of bets are made during the games (in-play betting) and can be made on virtually anything from coin toss (NFL), first foul (NBA) or number of fights (NHL). This new breadth of betting requires robust data integrity and is therefore why industry stakeholders must rely on a single source of truth (read: data providers).

“Without data you’re just another person with an opinion.” – W. Edwards Deming, Statistician

The professional sports data-aggregation business is essentially a duopoly run by Sportradar Group AG (SRAD US) and Genius Sports Ltd. (GENI US), and Global Alpha is a shareholder of both. These two companies offer B2B data and technology solutions for the sports industry. The core of their business models is to hold streaming rights and exclusive data acquisition for specific sports leagues that are then sold to sportsbook operators like DraftKings and Flutter. They also offer solutions back to sports leagues, teams and broadcasters such as data analytics and insights, as well as augmented display and data overlay or even odds creation.

The lucrative reason for their existence is straightforward: the technology platforms used to collect, clean and aggregate live data require specific expertise that sports leagues do not possess and would be expensive to replicate; it is much easier for leagues to outsource to SportRadar and Genius Sports and benefit from the materially increased consumer engagement as well as royalties.

SportRadar was founded in 2001 and was one of the first online live sports statistics data collection websites. Its initial public offering (IPO) happened in 2021 and it owns rights to the NBA, NHL, MLB, F1 and the European Football League.

Genius Sports is the new(er) kid in the industry, resulting from a merger of Betgenius and SportingPulse in 2016 to create a direct competitor to SportRadar. It owns data rights to NCAA, NASCAR, NFL, PGA Tour and European Basketball.

These two companies check many of the boxes we look for when investing:

• The majority of revenue is steady, predictable and globally diversified.
• A net cash position and resilient balance sheet allowing for flexibility and potential M&A.
• A large growing market with catalysts for accelerated growth.
• A competitive advantage that is unlikely to be challenged over our investment period.

Between the two companies, SportRadar and Genius Sports own the official rights to virtually all major western sports leagues. Furthermore, they have been developing other angles for partnering with leagues beyond just distribution of data and they’re progressing toward becoming their technology arms. Through their data aggregation and technology solutions, the US sports-betting players are poised to grow and with plans for future innovation, they look to be investments you could bet on.